It's not a surprise to see travel among the hardest hit industries this year, and the stocks have taken a beating in the process. Airlines, hoteliers, cruise lines, car rental agencies, travel portals, ridesharing platforms, and even theme park operators have been slammed in 2020. A lot of the companies you know in these realms won't bounce back.
Let's take a closer look at three publicly traded companies in different travel specialties. Let's size up Booking Holdings (NASDAQ:BKNG), Royal Caribbean (NYSE:RCL), and Uber (NYSE:UBER) -- entirely different companies with strong interests in travel and transportation -- to see which ones will beat the market from here.
The world's largest online travel portal has fared better than you probably think as an investment. Booking Holdings stock entered the weekend just 19% below its near-term peak in early January, and 24% below the all-time high it set in the springtime of 2018. This is pretty tame for a portal that saw its gross travel bookings decline 51% through the first three months of this year. Analysts see a brutal 85% plunge in revenue when it posts its second-quarter results on Aug. 6.
Will it beat the market in the year ahead? I'm not sure if I would be putting new money to work on Booking until we hear what the company has to say in its financial update a week from Thursday. One of Booking's strongest bullish arguments is that it's globally diversified, and there are some countries where the travel industry is bouncing back faster than the U.S. market. Its namesake Booking.com derives most of its business in Europe, for example. However, it's probably best to get a pulse on how Booking Holdings feels next week following what should be a horrible quarter.
The world's second-largest cruise line has held up as a stock slightly better than its two rivals this year, but it's still been a sinking ship. The stock has fallen a blistering 62% in 2020. The entire cruising industry stopped sailing in mid-March, and it took several months just to repatriate crew members to their home countries. The CDC's No Sail Order has been extended to October, and no one will be surprised if the resumption date gets pushed out again.
Will it beat the market in the year ahead? This is a scary time to buy into the cruise line market despite the battered share prices. However, if you're going to brave the cruise line industry, you may as well go with Royal Caribbean. It commands the industry's highest margins, has a strong loyal fan base, and will probably be the first player to return to profitability. It may take several years for earnings to return to 2019 form on a per-share basis, but it can still beat the market along the way.
The world's top ride-hailing platform is now trading higher year to date, but Uber continues to be a broken IPO since going public at $45 in May of last year. It's a juggernaut, accounting for roughly $65 billion in gross bookings across all of its platforms last year.
The pandemic hasn't been kind to Uber's flagship ridesharing business, but it's been a positive catalyst for its takeout-delivery service. Uber Eats recently entered into a $2.65 billion stock deal for smaller rival Postmates, and it's been aggressively promoting its platform at the expense of near-term margins.
Will it beat the market in the year ahead? The quarter that ended in June will be challenging -- and we still don't have those numbers -- but Uber held up modestly well in the first quarter. Adjusted net revenue rose 18% for the quarter, and its 103 million monthly active platform consumers worldwide is an 11% increase over the past year. Uber's chances of beating the market would be easier to get behind as a contrarian play if Uber was trading lower in 2020, but it's tricky to remain bullish as the stock rises despite the near-term slump in fundamentals. Uber will be a long-term winner, but a lot of things will have to go right for the stock to keep moving higher and beating the market in the year ahead.
Booking Holdings, Royal Caribbean, and Uber are some of the market's more interesting transportation stocks within the broader travel industry. There are plenty of question marks on all three stocks, but the upside is there if the travel industry bounces back sooner rather than later.